Oil sand technology could produce significant greenhouse gas headache

Small provision in energy law sparks big debate over transportation fuels
(Greenwire - 3/20/2008)

Ben Geman, Greenwire senior reporter

One sentence in a 300-page energy law raises a critical question: Are the twin goals of U.S. energy security and a clean environment in conflict?

A provision in the 2007 law bars the government from signing contracts to buy alternative fuels if producing and using them produces more greenhouse gases than conventional fuels. The provision's author, Rep. Henry Waxman (D-Calif.), says the idea is to prevent tax dollars from supporting fuels that would accelerate global warming.

Waxman's provision targeted military plans for buying coal-to-liquids fuels, but it also may capture, to an unknown degree, fuels derived from Canada's booming oil sands sector. Federal energy use is just a small fraction of U.S. demand, but the provision is being widely scrutinized against the backdrop of major shifts in energy markets.

Here's what's driving major interest in the provision:

• Oil prices have continued to surge and seem likely to stay high.
• Restrictions have grown on Western oil companies' access to major producing areas.
• A continued political push to reduce U.S. use of oil from OPEC suppliers and unstable regions.
• Increased production of oil sands, and interest in coal-to-liquids, oil shale and other nontraditional sources.

Oil sands provide a growing source of supply from a U.S. ally, while coal-to-liquids and oil shale would allow the United States to make liquids fuels from natural resources found in abundance here. But absent the widespread use of carbon capture and storage technology, coal-to-liquids and oil sands emit far more greenhouse gases than conventional crude oil production.